There is a rapidly growing PBM audit trend in which recoupment demands are not based on dispensing errors, billing errors, or even inventory shortfalls, but rather on where a pharmacy purchases its drug inventory. In these instances, PBMs are recouping paid claims solely because a pharmacy sourced products from a wholesaler that lacks a particular private accreditation, even though that accreditation may not be required under the applicable federal or state law governing the transaction. Pharmacies that accept these findings at face value may be leaving significant defenses on the table.
NABP Accreditation and the DSCSA
The accreditation PBMs most frequently invoke when challenging purchases is the National Association of Board of Pharmacy (NABP) Drug Distributor Accreditation (DDA) program, formerly known as Verified-Accredited Wholesale Distributers (VAWD). NABP accreditation is distinct from federal Drug Supply Chain Security Act (DSCSA) requirements. A wholesaler’s decision to seek accreditation is voluntary, and a pharmacy is not legally barred from purchasing from a wholesaler simply because that wholesaler has not obtained NABP’s private credentialing.
The federal legal framework governing prescription drug supply chain security and traceability is the DSCSA. The DSCSA requires pharmacies and other covered trading partners to transact only with authorized trading partners and establishes requirements related to licensure, product tracing, and verification; it does not itself require NABP Drug Distributor Accreditation. That distinction between NABP accreditation and the applicable federal legal framework is significant, and pharmacies facing recoupment on this basis should understand it before responding.
PBMs Are Blurring the Line Between Contract and Law
PBM provider manuals frequently require pharmacies to purchase from “authorized” or NABP-accredited wholesalers as a condition of reimbursement. That may be an enforceable contractual term, however, the problem arises when PBMs hold a purchase from a non-accredited wholesaler as a “compliance violation” or characterizes it into their fraud, waste, and abuse (FWA) allegations implying the pharmacy broke the law when the underlying issue may be far more limited.
A growing number of states have enacted laws that push back against precisely this kind of overreach restricting the ability of PBMs and affiliated entities to dictate where pharmacies may purchase their inventory and protecting pharmacies’ rights to source drugs from any lawfully licensed supplier.
New York provides one of the clearest examples. Under New York Public Health Law § 280-C, when a PBM conducts an invoice audit of a pharmacy, the PBM must “accept as validation invoices from any wholesaler registered with the department of education from which the pharmacy has purchased prescription drugs.” Accordingly, a PBM cannot reject otherwise qualifying invoice documentation solely because the wholesaler is not on the PBM’s own “authorized” or “preferred” list. This distinction may be particularly important when a PBM attempts to use the wholesaler’s accreditation status as the basis for a recoupment or a broader FWA allegation.
What to Do If You Receive a PBM Wholesaler Accreditation Audit Finding
If your pharmacy has received an audit finding or recoupment demand based on wholesaler accreditation, how you respond can determine whether the recoupment is sustained or reversed. Pharmacies should not assume that a finding labeled “compliance violation” or “fraud, waste, and abuse” necessarily reflects a violation of law. In many cases, the underlying issue may involve a contractual question that warrants careful evaluation before the pharmacy responds. Before responding, pharmacies should evaluate the PBM contract and provider manual, the wholesaler’s licensing and accreditation status, applicable DSCSA requirements, and any state laws governing PBM audits and invoice validation.
How Frier Levitt Can Help
Frier Levitt has represented pharmacies in PBM audit disputes involving wholesaler accreditation and sourcing-based recoupments. We regularly advise pharmacies on responses to audit findings, recoupment demands, and related contractual and regulatory disputes affecting PBM network participation. If your pharmacy has received an audit finding or recoupment demand based on wholesaler accreditation or drug sourcing, contact our team to evaluate the contractual, regulatory, and state-law issues that may affect the audit outcome.
Senior Counsel
